The Hour of the Technocrats

The Hour of the Technocrats has arrived. In desperation from debt crises that their gridlocked political systems have created, Italy and Greece both in November chose new Prime Ministers who are technocratic economists rather than politicians: Mario Monti and Lucas Papademos, respectively. One can even describe them as professors: Monti has been president of the prestigious Bocconi University when not a European Commissioner in Brussels, and Papademos has been my colleague at Harvard Kennedy School in the year since he finished his term as Deputy Governor of the European Central Bank (even teaching a class I usually teach).

No doubt, whatever happens, pundits who evaluate their performance will soon be writing: “Professors Earn ‘A’ in Economics, but Flunk Politics.” This will be unfair. It is not lack of political ability that will stymie them, but lack of political power in the mandates they have been given. Mario Monti, despite very strong popular support among Italians for his technocratic government, does not have a parliamentary majority that he can rely on. Berlusconi, in boasting that he can pull the plug on Monti anytime he wants, has made it clear that he still will not lay aside his personal political interests for the good of the country even when everyone understands what he is doing.

Lucas Papademos in Greece has been dealt an even weaker hand. Despite his best efforts to insist on a term longer than three months and the ability to appoint some members of his cabinet, as requirements for accepting the Prime Ministership, in the end he could not get even these minimum conditions.

The elevation of these two outstanding civil servants comes after a period when some other professors have been squeezed out by the political process. Several good technocratic economists from emerging market countries were passed over in June, when choosing the successor to Dominique Strauss-Kahn as Managing Director of the International Monetary Fund.

Next, an example from Germany. Axel Weber in January 2011 resigned as President of the Deutsche Bundesbank and member of the Governing Council of the European Central Bank. The interpretation in the press was that his statements opposing ECB purchases of bonds issued by troubled periphery countries had been evidence of political naivety on his part. The press could not imagine that a technocrat might voluntarily relinquish a sure shot at a position of great power — successor to Jean Claude Trichet as ECB President — on a matter of principle. But that is precisely what Weber was doing. The willingness to give up power if necessary is one of the advantages of professors for such positions. (It is a different matter that the ECB presidency then went to Mario Draghi, who is also an economist and technocrat, and in fact the perfect man for the job.)

It is a mistake to conflate technocrat elites (they are the ones with the PhDs or other advanced economics degrees) with other kinds of elites (the ones with money or power, especially if they got them from their parents). Most economists understood very well the possible downside of European monetary union. In the late 1980s, when Jacques Delors asked major European leaders what the next step should be in the European integration project, they underestimated the technical difficulties when they opted for monetary integration.

Technocrats can play a useful role. One of their advantages is acting as an honest broker when traditional politicians have become discredited or parties are deadlocked. Another is the credibility that comes when they are not motivated by getting re-elected, either because their term in office has been limited in advance or because it is know that they in fact prefer the quiet life back at the university. The most obvious advantage to technocrats comes when the biggest problems facing the country are in large part technical such as proposing economic reforms or negotiating loan terms. A good precedent in Italy is Carlo Ciampi, who took the governing reins in 1993 after Italy was forced to drop out of the European Exchange Rate Mechanism, but managed to repeal the scala mobile (the wage indexation system), beat down inflation, and re-board the train of European monetary integration.

Obvious disadvantages of some technocrats include lack of managerial experience, lack of perceived legitimacy, and lack of a domestic political powerbase. Monti and Papademos both have managerial experience and, for now, perceived legitimacy. The last of the three factors will be the limiting factor for them.

Among current heads of state who could be considered technocrats are President Felipe Calderón of Mexico, President Sebastián Piñera of Chile, and President Ellen Johnson Sirleaf of Liberia. Nobody could accuse these three of having led sheltered lives or being unaccustomed to making difficult decisions. But it happens that all three received their ivory tower training at the Harvard. Calderóntook a record three courses from me. Unfortunately, dealing with violent drug lords was not on my syllabus.

Having shiny international credentials is not always an advantage. When Sirleaf received the Nobel Peace Prize in 2011, the speculation was that this evidence of her good image abroad could hurt her with the voters at home in her campaign for re-election. Analogously, Prime Ministers Monti and Papademos hold gold card memberships in the clubs of EU and euro elites that will help them obtain support for their countries abroad but leave them vulnerable domestically to charges that they are lackeys of foreign powers.

It is good that Rome and Athens, the two seats of classical western civilization, have turned to these two civilized men for leadership. I hope the politicians realize that Monti and Papademos cannot work miracles if they are not given the political tools to get their policies enacted.

3 Responses to "The Hour of the Technocrats"

DiranM December 6, 2011 at 11:06 am

Jeff: How can you admire Loukas Papademos in view of your previous piece: The ECB’s Three Mistakes in the Greek Debt Crisis, when Papademos was involved both at Governor of the Bank of Greece and sitting as a member of the ECB in policies that you have publicly opposed. In particular, Loukas Papademos at the Bank of Greece pushed for Greek entry into the Eurozone on questionable data and knowing full well that the Greek economy did not meet the Mundell conditions and was not ready for this. Immediately, the Euro destablilized the Greek balance of payments and caused havoc, leading to the miserable situation today in Greece and huge losses on Greek sovereign debt. Papademos recently compounded his errors showing extremely poor judgement by openly opposing the Greek PSI in a Financial Times Op-Ed. Does not seem that the man really understands much about the mess that Greece is in by these actions….. Reading RGE and especially Nouriel Roubini might be a good start for Papademos learning basic economics!!!